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REPRINT FROM JULY 12, 2010

BioCentury ™ THE BERNSTEIN REPORT ON BIOBUSINESS Article Reprint • Page 1 of 8

Strategy Idec’s agenda

By Karen Bernstein Pharmaceuticals Corp. failed to create shareholder value and Editor-in-Chief that the biotech might need to be split up into a Of all the first generation big cap biotechs, Biogen Idec Inc. company and a cancer company. has always been known as the stodgy one. Ironically, it has taken He also noted that the company hadn’t introduced a new the intervention of activist investors — generally thought of as product since 2004, saying the R&D group needed to be green eyeshade wearers with a singular focus on the short-term reinvigorated, and called for an examination of Biogen Idec’s cost bottom line — to finally bring in a quintessential biotech CEO structure. with the kind of R&D background that is still at the heart of what In June of this year, a third Icahn nominee was elected to the biotech is all about. board. At the end of June, the company an- With three Icahn directors, several nounced it was hiring George Scangos as “A question I get a lot is that new directors chosen by Biogen Idec, and CEO. Scangos, who had been president I don’t have any commercial a new CEO, chapter two now begins. and CEO of Inc. since 1996, is a microbiologist by training. He was previ- experience. I find that Leadership ously president of Bayer . question misguided.” The hiring brings to a close the first After three years of fights between chapter in ’s involvement in the George Scangos, Biogen Idec investors and management, both in , which began when he made an and in private, of aborted efforts to sell the initial investment in August 2007. Soon company, of changes to the board, of talk thereafter, the company put itself up for sale, a process that of splitting up the company, it finally looks — at least from the proved unsuccessful. outside — as if everyone left standing is on the same page. In February 2008, Icahn proposed three nominees for the Given where Biogen Idec was in 2007 before the turmoil and proposed to restructure the board in began, the facts argue that the company was in need of more than hopes to restarting efforts to sell the company. He also said that a little shaking up. if the company “failed to act to enhance shareholder value” he The company has produced far less over the years than its would come back the following year to nominate four more brethren from the first biotech generation. Its nearest comps are directors. Inc. and Inc., and Biogen Idec has under- Icahn didn’t get his initial slate elected and indeed came back performed both of them. the following year with four more nominees, two of whom were In terms of products on the market, Amgen has seven elected to the board in June 2009. Among Icahn’s critiques at the marketed drugs for which it breaks out sales, including five that time were that the 2004 merger of Biogen Inc. and Idec See next page BioCentury, THE BERNSTEIN REPORT ON BIOBUSINESS REPRINT FROM JULY 12, 2010 PAGE 2 OF 8 Strategy, resentatives on the board, echoed this cern,” Scangos told BioCentury. “But I from previous page view. talked to every member of the board, “George is an excellent manager who many of them more than once. I think sell more than $1 billion annually. Genen- will focus on execution in the commercial most of the acrimonious stuff is behind tech has nine marketed products, includ- operations and bringing value to Biogen them and they’re trying to work together ing four with more than $1 billion in sales. Idec shareholders,” Denner told BioCen- to take the company forward. Everybody Biogen Idec has only four products on the tury. “For instance, I think that he will is looking forward to a new start.” market, two of which sell more than $1 demand that shareholders get a good He added: “Some people are represen- billion a year. return from R&D investment.” tatives of Carl Icahn and others are not. The company has not had a commer- Notably, Scangos agreed to work for a But if I didn’t know that going in, I wouldn’t cial launch since 2004, and 2009 revenue board that is now clearly focused on have been able to tell. They’re all con- growth was only 7%. Non-GAAP EPS getting investors a return on their money. cerned with the same issues.” growth was 13%, reflecting stock buy- “When I started the process this obvi- Kurt von Emster of venBio LLC, who backs and a reduction in SG&A. For 2010, ously was an issue of considerable con- See next page the company has been guiding for reve- nue growth in the mid-single digits. Blockbuster drug counts Biogen Idec also has let its key Avonex franchise slip. In 2008, Copaxone glati- Biogen Idec Inc. (:BIIB) has two drugs with more than $1 billion in revenue, while Amgen ramer from Teva Pharmaceutical In- Inc (NASDAQ:AMGN) has five and Genentech Inc., which was acquired by Roche in 2009, has four. dustries Ltd. became the world’s best- Product revenues attributed to the company for 2009 are listed below in brackets. (A) 2009 U.S. sales selling therapeutic, even figures reported by Roche (SIX:ROG; OTCQX:RHHBY) converted from CHF to U.S. dollars using though most observers would argue that the Dec. 31, 2009 exchange rate of CHF = $0.9654 Biogen Idec’s Avonex interferon beta-1a is the better drug. In the U.S., Copaxone Biogen Idec Amgen Genentech (A) sales grew an average of 25% annually Avonex [$2.3B] Enbrel [$3.5B] Avastin [$3.2B] during 2005-09 vs. 11% for Avonex. Rituxan [$1.1B] Neulasta [$3.4B] Rituxan [$2.9B] Meanwhile, Biogen Idec has been Tysabri [$776M] Aranesp [$2.7B] Herceptin [$1.5B] spending about 30% of revenues on R&D, with less to show for it. Amgen and Ge- Fumaderm [$50M] Epogen [$2.6B] Lucentis [$1.2B] nentech spend about 20%. Amgen has 28 Neupogen [$1.3B] Xolair [$599M] NCEs in its pipeline, Genentech had 21 Sensipar [$651M] Tarceva [$503M] prior to being acquired by Roche, and Biogen Idec has 19. Vectibix [$233M] Activase/TNKase [$397M] Thus it would not take an activist to Other [$110M] Nutropin prods [$377M] suggest that someone needed to take a Pulmozyme [$291M] fresh look at the company from top to bottom, to revive its commercial fortunes, to fill the leadership void in the R&D Avonex vs. Copaxone organization that has been vacant since October 2009, and to rationalize R&D Copaxone glatiramer overtook Avonex interferon beta-1a to become the best-selling multiple spending. sclerosis drug in 2008. From 2005 to 2009, global sales of Copaxone grew at an average annual rate While many of Biogen Idec’s problems of 25% vs. 11% for Avonex. In the U.S., Copaxone sales have grown by 25% compared with 11% for are commercial, the board has clearly Avonex. $M concluded this does not mean the compa- ny needs a CEO with a commercial back- Ç ground. $YRQH[Ã86 $YRQH[Ã([86 Not surprisingly, Scangos agrees. Ç “A question I get a lot is that I don’t &RSD[RQHÃ86 have any commercial experience,” he told &RSD[RQHÃ([86 BioCentury last week. “I find that question Ç misguided. It’s a CEO position — not a head of sales and marketing. The right person needs to know how to manage Ç things that are not in their background.” At the same time, he added, “my com- Ç ing here shouldn’t be interpreted as Bio- gen Idec emphasizing R&D. It is an R&D- based business, but the first priority is Ç expanding and protecting the commercial franchise. A CEO has to manage the Ç whole company.” Alex Denner, one of Carl Icahn’s rep-      BioCentury, THE BERNSTEIN REPORT ON BIOBUSINESS REPRINT FROM JULY 12, 2010 PAGE 3 OF 8 Strategy, Products at Hologic Inc., and Mun- Teva is trying to block that version from from previous page schauer had been chairman of the depart- coming to market. ment of neurology at SUNY Buffalo Second, ’ fingolimod, the first doesn’t hold shares in the company, had School of Medicine. oral MS treatment, is likely to come on the the same impression. If it were just a question of getting market soon. In June, FDA’s Peripheral “It was a unanimous decision by the more face time with doctors and making and Central Nervous System Drugs Advi- board to bring him in and he will be sure the company had all the data needed sory Committee overwhelmingly recom- working well with Icahn because they to back up its claims, the job of fixing mended approval of the sphingosine 1- vetted him through the process,” he said. Avonex sales would be relatively straight- phosphate (S1P) receptor agonist for first- “The acceptance of George Scangos as forward. line use. The PDUFA date is Sept. 21. CEO means they will be more willing and But two big challenges complicate the If other doctors are as enthusiastic as able to do strategic business develop- picture. the panelists, fingolimod will take over the ment, in-licensing, partnering and what One is that Copaxone is approaching first-line market from Avonex, Copaxone have you without a fine focus on earn- its patent cliff and will go generic. Teva and the two other IFNs on the market for ings.” has patents expiring in May 2014 in the MS. Two other fund managers, both of U.S. and in May 2015 in most of the rest Biogen Idec has its own oral entry, BG- whom asked not to be named and neither of the world. In July 2008, FDA accepted 12, in Phase III testing. But the dimethyl of whom holds shares in the company, for review an ANDA from Sandoz Inc., the fumarate would likely be the third oral on were not so sanguine. U.S. division of Novartis the market. The likely number two is “He’s well respected but he is some- AG, and Momenta Pharmaceuticals Merck KGaA’s cladribine, a purine nu- what late in his career,” said one. “At age Inc., for a generic version of Copaxone. See next page 62, people are going to wonder if he is a 2-3 year person, which would mean they Pipelines and R&D are then back to the drawing board.” Said the other: “There will be a steep Biogen Idec Inc. (NASDAQ:BIIB) has consistently spent about 30% of revenues on R&D, $4.7 learning curve for him at Biogen Idec and billion, over the past five years, and has 19 NCEs and two already approved drugs in clinical success will be dependent on his ability to development for additional indications. This includes seven NCEs in Phase III or registration, of delegate in the areas where his experience which six are from in-licensing deals or acquisitions. Both Amgen Inc. (NASDAQ:AMGN) and is lacking. I think the degree of investor Genentech Inc. have spent historically about 20% of revenues on R&D. Amgen has 33 compounds patience during this process is an open in clinical development, of which 28 are NCEs. Prior to being acquired by Roche (SIX:ROG; question.” OTCQX:RHHBY), Genentech had 29 compounds in the clinic, of which 21 were NCEs.The pipeline analysis below only counts the lead indication for each NCE and the lead line extension (LE) for each already approved drug. (A) Used projected 2009 revenues and R&D expenses from Genentech’s Fixing commercial November 2008 financial model; (B) Pipeline when Roche proposed to acquire Genentech in mid- Job one is to fix Biogen Idec’s commer- 2008 cial operation — which means shoring up Ç È its MS franchise. %LRJHQÃ,GHF $PJHQ *HQHQWHFK %LRJHQÃ,GHFÃÈ $PJHQÃÈ *HQHQWHFKÃÈ “The Avonex franchise can be im- %Ç È 5 proved. The goal is to reverse the trend” Ç É of falling behind Copaxone, Scangos said. à ' ' à “It’s a blocking and tackling issue — we ÉÇ È VD Ã5 Èà need to do that to get our share. This 3 Rà $Ç È I includes everything from how many sales $ Uà * H reps you have, how do you train them, Q VY RÇ È share of voice, etc.” 1 William Young, an independent direc- tor who was elected chairman in Decem- Ç È ber last year, told BioCentury that this     à $ included targeting the right patients, be- ing consistent with messages, and getting  in front of the right doctors. All of these are steps that the company began before 3KÃ,,,UHJÃ>/(@  3KÃ,,Ã>/(@ hiring Scangos. V G Q 3KÃ,Ã>/(@ X The company already had made some R S 3KÃ,,,UHJÃ>1&(@ key hires on the commercial side. In Jan- P FR uary, it brought in Francesco Granata as Ià 3KÃ,,Ã>1&(@ ÃR EVP of global commercial operations, Tony R 3KÃ,Ã>1&(@ 1 Kingsley as SVP of U.S. commercial oper-  ations, and Frederick Munschauer as VP of U.S. medical affairs. Granata had been group VP at Scher-  ing-Plough Corp., Kingsley had been SVP %LRJHQÃ,GHF $PJHQ *HQHQWHFKà % and general manager of GYN Surgical BioCentury, THE BERNSTEIN REPORT ON BIOBUSINESS REPRINT FROM JULY 12, 2010 PAGE 4 OF 8 Strategy, In a Phase II study, BG-12 reduced the number of gadolinium- from previous page enhancing lesions on monthly MRI scans from week 12 to week 24 by 69% vs. placebo (p<0.001) and reduced the number of cleoside analog for which the pharma submitted an NDA in June. new T1 hypointense lesions by 53% vs. placebo (p=0.014). “Of course, there’s a plan to deal with the orals that are “What will happen now is there will be a lot of choices for coming,” Scangos said. “Of course, they’ll take market share. But MS patients; different patients will take different drugs. What Novartis’ compound is not without its issues.” we’re seeing is the beginning of subsetting the MS patient Biogen Idec, he noted, will have a menu of MS offerings: population,” Scangos said. “What I like about Biogen Idec is we Avonex, Tysabri , BG-12, pegylated Avonex, and have two drugs now, Fampridine could be introduced in Europe, Fampridine SR (Ampyra dalfampridine) in Europe. plus we’ll have a long-acting version of Avonex.” “Avonex is really a good product, it provides benefits to MS Indeed, of the five new products Biogen Idec hopes to launch patients over the long term, and it’s been on the market for a long in the next three years, three are for MS. In addition to BG-12, time, so there are no surprises,” Scangos said. pegylated Avonex is in Phase III trials. The company’s other marketed MS drug, Tysabri, poses a Closest to providing revenues is Ampyra, for which Biogen different challenge: segmenting patients who are and are not at Idec has European marketing rights from Acorda Therapeu- risk for progressive multifocal leukoencephalopathy. tics Inc. It could be approved in Europe in 1Q11 to improve “The JC virus assay that’s being developed is the first step in walking in patients with MS. that,” Scangos said. “Tysabri is the single most efficacious drug The products outside the MS space are for hemophilia: for MS. If it proves true that half the patient population is negative recombinant Factor VII and Factor IX fusion proteins. for the JC assay, then half the population could take Tysabri without concern for PML. That would be a substantial expansion of the population.” Fixing R&D Biogen Idec and partner Elan Corp. plc have been using a Fixing R&D is obviously a long-term endeavor, but there are PCR assay from ViraCor-IBT Laboratories in clinical trials. moves that Scangos will take immediately. These include hiring But even among patients who test positive, Scangos added, a new head of R&D, paring programs, instituting benchmarks to “most don’t ever develop PML, so there could be further make sure programs meet pre-specified hurdles and getting segmenting of that population.” Biogen Idec’s R&D spend in line with its peers. Avonex costs $32,791 annually, Copaxone costs $36,805 According to von Emster, “Bill Young has built consensus and Tysabri costs $39,988 following an 18.7% price increase this among the board and shareholders about the direction of the year. company. The selection of Scangos means they will be an R&D- Regarding BG-12, Scangos noted that it had good efficacy first organization for at least the next several years. They need and was well tolerated in Phase II trials. See next page Biogen Idec deals

Biogen Idec Inc. (NASDAQ:BIIB) has completed at least eight deals since the start of 2006 that include significant upfront payments and milestones. Source: BCIQ: BioCentury Online Intelligence

Year Company Value Deal details 2009 Inc. $110M up front; $400M Exclusive, worldwide rights outside the U.S. to (NASDAQ:ACOR) milestones Acorda’s Fampridine-SR for multiple sclerosis 2008 Genentech Inc./Roche $31.5M up front; profit- Exercises option to co-develop and commercialize GA101, a (SIX:ROG; OTCQX:RHHBY) share humanized mAb against CD20 for cancer, with Genentech in the U.S. 2007 Cardiokine Inc. $50M up front; $170MDevelop and commercialize Cardiokine’s lixivaptan to treat milestones hyponatremia 2007 Neurimmune Therapeutics AG $2M upfront; $378M Develop and commercialize human that milestones bind to beta amyloid to treat Alzheimer’s disease (AD) 2007 Syntonix Pharmaceuticals Inc. $40M up front; $80M Syntonix had preclinical programs in hemophilia at the time [acquisition] milestones of the deal, as well as two technologies: SynFusion, which links the Fc region of an to a therapeutic; and Transceptor, which enables pulmonary delivery of SynFusion products 2006 UCB Group (Euronext:UCB) $30M up front; $170M Develop and commercialize UCB’s CDP323 small molecule milestones integrin alpha(4) inhibitor to treat relapsing-remitting multiple sclerosis (RRMS) 2006 Fumapharm AG [acquisition] $220M up front; $315M Full ownership of BG-12, an oral fumrate derivative, which the milestones companies had completed Phase III for moderate and severe and Phase II testing for RRMS 2006 Conforma Therapeutics Corp. $150MConforma had two Hsp90 inhibitors in Phase I testing for [acquisition] hematologic and solid tumors at the time of the deal BioCentury, THE BERNSTEIN REPORT ON BIOBUSINESS REPRINT FROM JULY 12, 2010 PAGE 5 OF 8 Strategy, been far on the other side of the spectrum, from previous page “I think that he will finding too little to like. Indeed, the company has publicly said to give shareholders comfort that there demand that shareholders there isn’t much to buy: on a February can be growth beyond Avonex and Avon- get a good return from 2008 conference call in which Biogen Idec ex price increases. So either through ex- announced that it was taking itself off the ternal or renewed internal development R&D investment.” market, former CEO James Mullen said he they need to send a clear signal on which didn’t anticipate going after any large way they’re going to go and do it.” Alex Denner acquisitions, arguing that there weren’t The company is guiding that 2010 any that were “both interesting and at- R&D spending to be 24-27% of revenue — people working on a project,” Scangos tractive in valuation” . still above its peers, but starting to get noted. “But is this a fixed number, or can But where Biogen Idec saw nothing, down into reasonable territory. you use five when you need them and 40 other companies saw at least some oppor- “I need to take a good look at the when you need them — a SWAT team tunities. Since Mullen made his statement, pipeline,” Scangos said. “We spend a lot approach?” there have been 20 acquisitions in Biogen of money and don’t get enough out of it.” With regard to finding a new head of Idec’s areas of disease focus valued from The question is, he said, “what do you R&D, the company will be banking on $500 million to $8.2 billion — a valuation get for what you spend — including com- Scangos’ scientific resume to help attract range that includes significant deals with- paring what you get on the inside vs. what a top tier candidate for the job, which has in reach of the company’s balance sheet . you could get on the outside.” been vacant since Cecil Pickett retired in Biogen Idec did try to buy Facet Bio- Scangos added: “High on my list is October 2009. tech Corp. last year for $17.50 a share, or going through the portfolios of the three In his early days at Yale University, $449.9 million. Facet was a logical target, therapeutic areas — neurology, oncology Scangos was a member of a group that since the companies are partnered on two and immunology — and asking are these made the world’s first transgenic mouse. antibodies: , a humanized mAb the right strategic areas? Are these the Then at Johns Hopkins University in against IL-2 that is in Phase III testing to right number of areas? Are these the right the early 1980s, the lab he was in was one treat MS; and volociximab, a mAb against targets and compounds?” of the few at the time able to make trans- integrin alpha(5)beta(1) that is in Phase II The company also has smaller pro- genic mice. One of the mice the team testing in solid tumors. grams in hemophilia and cardiopulmo- created had an early version of the JC But Biogen Idec was outbid by Abbott nary disease. virus with a demyelination phenotype, Laboratories, which ponied up $27 a Biogen Idec has long been known as a enabling the group to track down what share, or $722 million. company where projects don’t die, and the virus was doing. Otherwise, the list of Biogen Idec’s Scangos plans to rationalize the portfolio “I can think of two or three people who transactions is short, and all except two of using the R&D metrics he used at Exelixis. would be really good,” Scangos said. “We’ll the deals have been small for a big bio- Some are obvious, like clearly identifying start that immediately. Realistically it takes tech. In total, the company has completed technical, competitive and market bench- 3-6 months.” at least 17 discovery, in-licensing or M&A marks. Others are focused on productiv- deals since 2006, including extensions of ity. prior deals, of which eight had significant “Some of the things we did at Exelixis Dealing with strategic intent upfront payments and milestones. are scalable,” he said. “For example, deci- In an era when no company can grow Most recently, Biogen Idec received sion making in the transition from discov- solely through internal R&D, not-invent- exclusive rights to Ampyra outside the ery to early development. A lot of tests are ed-here syndrome cannot lead to a sus- U.S. from Acorda for $110 million up done by companies in sequence, but you tainable, growing business. And given the front and up to $400 million in milestones. can also do them in parallel. You can use challenges to its MS franchise, Biogen Idec Biogen Idec also obtained full owner- an algorithmic approach to weigh time needs to bring some major revenue into ship of BG-12 with the 2006 acquisition of versus potential lost revenue — you can the equation. Yet the company hasn’t Fumapharm AG for $220 million in cash weigh for individual projects which is the done a major deal since it merged with and up to $315 million in milestones. best approach.” Idec in 2003. In that same period, Amgen completed Another example is to have flexible While no one would argue that every at least 17 deals, of which nine were teams. “A typical approach is to have 20 acquisition is a good one, Biogen Idec has See next page

DAVID FLORES KAREN BERNSTEIN, Ph.D. BioCentury® President & CEO Chairman & Editor-in-Chief THE B ERNSTEIN R EPORT ON B IOBUSINESS BioCentury®, The BioCentury 100, and The Clear Route are trademarks of BIOCENTURY PUBLICATIONS INC. PO Box 1246 All contents © Copyright 2011, BIOCENTURY PUBLICATIONS INC. ALL RIGHTS RESERVED. No part of this San Carlos CA 94070-1246 publication may be reproduced, photocopied or reproduced in any form, retransmitted, or stored in a Voice: 650-595-5333 retrieval system without prior written consent of the publisher. Fax: 650-595-5589 www.biocentury.com The contents of this publication are gathered from sources believed to be reliable, but in any case are not warranted by the publisher for a particular use or purpose. Also, the content and opinions herein may change without notice and do not constitute investment advice. BioCentury, THE BERNSTEIN REPORT ON BIOBUSINESS REPRINT FROM JULY 12, 2010 PAGE 6 OF 8 Strategy, something is worth once value has been from previous page added to it. von Emster suggested the company BioCentury sizable, including four valued above $500 probably will be more focused on licens- ™ THE BERNSTEIN R EPORT ON BIOBUSINESS million. These included the $2.2 billion ing than acquisition. acquisition of Abgenix Inc. and the 2009 Another buysider noted, however, that Editorial & Research glucokinase activator (GKA) deal with there is intense competition for deals. Newsroom: Array BioPharma Inc. for $60 million “They do need to make some M&A moves,” [email protected] up front and up to $666 million in mile- he said, “but other people are all playing San Carlos, CA: +1 650-595-5333; Fax: +1 650-595-5589 stones. Genentech completed at least 30 in the same sandbox, including others : +1 312-755-0798; deals, of which nine were sizable and with deeper pockets, and everybody is out Fax: +1 312-755-0658 three were valued above $500 million, to get the latest and greatest product. So Washington, DC: +1 202-462-9582; including its acquisition of Inc. what makes Biogen more likely to succeed Fax: +1 202-667-2922 Not surprisingly, Scangos was mostly than somebody equally or more desper- Oxford, UK: +44 (0)1865-512184; on the sellside at Exelixis, which has been ate?” Fax: +44 (0)1865-311195 focused on kinase-based cancer drug dis- A third buysider had mixed feelings covery. about deals. “A larger acquisition could www.biocentury.com In its largest recent deal, Exelixis grant- dramatically change the dynamic for Bio- ed -aventis Group exclusive gen Idec,” he noted. “However, given the Editor-in-Chief: Karen Bernstein, Ph.D. rights to two phosphoinositide 3-kinase spotty track record among large cap bio- Managing Editor: Susan Schaeffer (PI3K) inhibitors that were in Phase Ib/II techs acquiring larger mid-caps, investors Director of Research: Walter Yang testing in cancer for $140 million up front would likely be skeptical of such a move.” Research Managers: Juli Balestrieri, and $21 million in research funding over Kevin Lehnbeuter three years, plus more than $1 billion in Senior Editors: Jeff Cranmer (BioCentury potential milestones. Not for sale? Extra), Steve Edelson (SciBX), Steve Usdin (Washington), Mike Ward Six months earlier, Exelixis granted The chain of events that culminated in (Europe) Bristol-Myers Squibb Co. rights to Scangos’ hiring began with a far different Senior Writers: Aaron Bouchie, two cancer compounds for $195 million direction, as the company half-heartedly Michael Flanagan, Tim Fulmer, Ph.D., up front, additional license payments in put itself up for sale in late 2007 after Michael J. Haas, Stacy Lawrence, 1H09 of $45 million, plus milestones that activist investors including Icahn first came Erin McCallister, Lev Osherovich, Ph.D. could range from $615-$760 million de- into the stock earlier that year. Staff Writers: Jacquelyn Cafasso, pending on whether the biotech opts out Matt Crockett, Meredith Durkin, Biogen Idec is clearly off the market for Stephen Hansen, Mabel Lam, of co-development rights for one of the now. Scangos isn’t a “fix-it-up-to-sell” Kai-Jye Lou, Lauren Martz, compounds. kind of CEO and the activists have clearly Brian Moy, Derek Smith But Scangos has been on the other side concluded that without some serious work of the equation as well. When he was at on the company, they couldn’t get the BioCentury Bayer AG, he was responsible for the kind of price they would want. BioCentury®; The Bernstein Report on 1994 deal with Onyx Pharmaceuticals But “not now” doesn’t mean “not BioBusinessTM; Because Real Intelligence is Hard Inc. for what eventually became Nexavar ever.” Indeed, these days it’s very clear to Find; BCIQ; The BioCentury 100; and The Clear sorafenib. that any good company is a potential Route to ROI are trademarks of BIOCENTURY “Bayer had no oncology research at acquisition target. PUBLICATIONS, INC. All contents Copyright © the time,” he said. “This was at a time “I’m going there with the thought that 2010, BIOCENTURY PUBLICATIONS, INC. when the ras pathway and other pathways we’re going to build the company,” said ALL RIGHTS RESERVED. SciBX and SciBX: were being discovered and characterized. Scangos. “But I’m not naïve. As a CEO Science-Business eXchange are trademarks of Na- It seemed to me if Bayer was going to get ture America, Inc. that are jointly used by BioCentury your job is always to build value for Publications, Inc. and Nature America, Inc. No part back into oncology, that was the time. We shareholders, so those issues are always of BioCentury’s Publications or Website may be started a small internal group in Connect- on the table.” copied, reproduced, retransmitted, disseminated, icut. I was the head of R&D and it was my Nor does it mean the company would sold, distributed, published, broadcast, circulated, job to put together collaborations. We not eventually be split up into a cancer commercially exploited or used to create derivative looked at Onyx, Sugen and Tularik and unit and a neurology unit, as Icahn sug- works without the written consent of BioCentury. settled on Onyx.” gested at one point. As companies get Information provided by BioCentury’s Pub- Valuing that deal wasn’t magic, he bigger and it becomes harder to grow lications and Website is gathered from sources that said. “It’s like buying a house. Part of it is revenues and EPS significantly in percent- BioCentury believes are reliable; however, metrics — what else is in the neighbor- age terms year after year, there is an BioCentury does not guarantee the accuracy, com- hood? These days you can get more of a argument to be made for breaking them pleteness, or timeliness of the information, nor does reflection of actual value.” up and putting the smaller P&Ls on a new BioCentury make any warranties of any kind In addition to a couple of small acqui- regarding the information. The contents of growth trajectory. BioCentury’s Publications and Website are not sitions at Exelixis, Scangos has gotten There is also an argument to be made intended as investment, business, tax or legal down to the dollars and cents of how that it is highly motivating to put employ- advice, and BioCentury is not responsible for any much something is worth through deals ees in small companies where it’s harder investment, business, tax or legal opinions cited that included buyback options, such as a for slackers to hide and any individual’s therein. 2005 deal with Symphony Capital. As a efforts by definition have a greater impact. result, he’s had to think about how much See next page BioCentury, THE BERNSTEIN REPORT ON BIOBUSINESS REPRINT FROM JULY 12, 2010 PAGE 7 OF 8

Strategy, Bristol-Myers Squibb Co. (NYSE:BMY), Princeton, N.J. from previous page Elan Corp. plc (NYSE:ELN), Dublin, Ireland Exelixis Inc. (NASDAQ:EXEL), South San Francisco, Calif. And while some management teams might like rubber stamp Genentech Inc., South San Francisco, Calif. boards, there is again an argument to be made that all boards of Hologic Inc. (NASDAQ:HOLX), Bedford, Mass. directors should be activists. In point of fact, happy investors Johns Hopkins University, Baltimore, Md. whose companies are growing and yielding good returns don’t Merck KGaA (Xetra:MRK), Darmstadt, Germany become activists. Momenta Pharmaceuticals Inc. (NASDAQ:MNTA), Cambridge, Mass. — Senior Writer Michael Flanagan contributed to this report Novartis AG (NYSE:NVS; SIX:NOVN), Basel, Onyx Pharmaceuticals Inc. (NASDAQ:ONXX), Emeryville, Calif. COMPANIES AND INSTITUTIONS MENTIONED Roche (SIX:ROG; OTCQX:RHHBY), Basel, Switzerland (NYSE:ABT), Abbott Park, Ill. sanofi-aventis Group (Euronext:SAN; NYSE:SNY), Paris, France Acorda Therapeutics Inc. (NASDAQ:ACOR), Hawthorne, N.Y. SUNY Buffalo School of Medicine, Buffalo, N.Y. Amgen Inc. (NASDAQ:AMGN), Thousand Oaks, Calif. Teva Pharmaceutical Industries Ltd. (NASDAQ:TEVA), Petah Tik- Array BioPharma Inc. (NASDAQ:ARRY), Boulder, Colo. va, Israel Bayer AG (Xetra:BAY), Leverkusen, Germany ViraCor-IBT Laboratories, Kansas City, Kan. Biogen Idec Inc. (NASDAQ:BIIB), Weston, Mass. Yale University, New Haven, Conn.

What could have been

Since the start of 2008, at least 19 companies in Biogen Idec’s main areas of interest — autoimmune, cancer, cardiovascular and neurology — were acquired for $500 million or more. (A) Status of programs at the time of the deal. Source: BCIQ: BioCentury Online Intelligence

Year Target Acquirer Value Major assets (A) 2010 (prop) Abraxis BioScience Inc. Corp. $2.9B plus $650MBreast cancer drug Abraxane nab- (NASDAQ:ABII) (NASDAQ:CELG) milestones paclitaxel, with 2009 revenues of $314.5 2010 (prop) TargeGen Inc. sanofi-aventis Group $75M plus $485M Small molecule kinase inhibitors, (Euronext:SAN; NYSE:SNY) milestones including lead compound TG 101348, which has completed a Phase I/II trial to treat myelofibrosis 2010 Corthera Inc. Novartis AG $120M plus $500M Relaxin recombinant human (NYSE:NVS; SIX:NOVN) milestones relaxin-H2 in Phase III testing to treat acute decompensated heart failure 2010 Facet Biotech Corp. Abbott Laboratories (NYSE:ABT) $722MDaclizum ab to start Phase III for multiple sclerosis; volociximab (M200) in Phase II for solid tumors 2010 Gloucester Pharmaceuticals Inc. Celgene Corp. (NASDAQ:CELG) $340M plus $300MIstodax romidepsin, which FDA milestones approved in November to treat cutaneous T cell lymphoma (CTCL) 2010 OSI Pharmaceuticals Inc. Astellas Pharma Inc. (Tokyo:4503) $4B Cancer drug Tarceva erlotinib, with $358.7M in revenue booked by OSI for 2009 2010 Valeant Pharmaceuticals Biovail Corp. $3.2B Marketed specialty, OTC and branded International (TSX:BVF; NYSE:BVF) generic drugs in neurology and dermatology; 2009 product sales of $710.8M 2009 BiPar Sciences Inc. sanofi-aventis Group Up to $500M BSI-201 poly(ADP-ribose) polymerase (Euronext:SAN; NYSE:SNY) [upfront (PARP) inhibitor in Phase II for undisclosed] various cancers 2009 Cougar Biotechnology Inc. Johnson & Johnson (NYSE:JNJ) $1B Abiraterone acetate (CB7630) in Phase III to treat prostate cancer

See next page

‘It’s the BioCentury’TM BioCentury, THE BERNSTEIN REPORT ON BIOBUSINESS REPRINT FROM JULY 12, 2010 PAGE 8 OF 8 What Could Have Been, from previous page

Year Target Acquirer Value Major assets (A)

2009 CV Therapeutics Inc. Inc. $1.4B Two marketed products: Ranexa (NASDAQ:GILD) ranolazine to treat chronic angina; and Lexiscan regadenoson, a pharmaco logic stress agent used in myocardial perfusion imaging; 2008 revenues of $154.5M 2009 Medarex Inc. Bristol-Myers Squibb Co. $2.4B Full rights to ipilimumab in Phase III (NYSE:BMY) for melanoma and prostate cancer; UltiMAb human antibody and Antibody-Drug Conjugate technolo gies; seven unpartnered antibodies in clinical testing and rights to three partnered antibodies 2009 Inc. H. Lundbeck A/S (CSE:LUN) $600M plus $300M Sabril vigabatrin under FDA review milestones for seizures and infantile spasms; marketed CNS drugs, including Xenazine for Huntington’s chorea; late-stage pipeline of CNS products; 2007 revenues of $176.1M 2009 Proteolix Inc. Onyx Pharmaceuticals Inc. $276M plus $575M proteasome inhibitor in (NASDAQ:ONXX) milestones Phase IIb to treat relapsed and refractory (MM) 2009 Sepracor Inc. Dainippon Sumitomo Pharma $2.6B Sepracor’s U.S. sales force of 1,200 and Co. Ltd. (Tokyo:4506; Osaka:4506). six marketed products, including insomnia drug Lunesta eszopiclone; 2008 revenues of $1.3B 2008 Aspreva Pharmaceuticals Corp. Galenica Ltd. (SIX:GALN) $915MCell Cept mycophenolate mofetil, to which Aspreva had rights for autoim mune indications from Roche (SIX:ROG; OTCQX:RHHBY); revenues of $214.8M in 2006 and $123.1M in 1H07, all of which came from CellCept royalties 2008 ImClone Systems Inc. Eli Lilly and Co. (NYSE:LLY) $6.5B Marketed cancer drug Erbitux ; 2007 revenues of $590.8M 2008 MGI Pharma Inc. Co. Ltd. $3.9B Cancer and acute care products and (Tokyo:4523; Osaka:4523) field sales specialists in the U.S.; marketed drugs, Aloxi palonosetron for chemotherapy-induced nausea and vomiting (CINV) and Dacogen decitabine for myelodysplastic syndromes (MDS); 2006 product sales of $336.8M 2008 Millennium Pharmaceuticals Inc. Takeda Pharmaceutical $8.2B Marketed MM drug Velcade Co. Ltd. (Tokyo:4502) bortezomib; booked $527.5M in Velcade sales and related revenue; MLN0002 humanized mAb against integrin alpha(4)beta(7) receptor in Phase II for ulcerative colitis and Crohn’s disease 2008 Speedel Novartis AG (NYSE:NVS; $998M Hypertension drug Tekturna SIX:NOVN) Rasilez aliskiren, which was already marketed by Novartis; other renin inhibitors in development to treat hypertension